Googling Cronyism

An impartial rule of law is one of the pillars of a free society, so the curious resolution of the Federal Trade Commission (FTC) probe into alleged anti-competitive practice by Google should be cause for concern even for those of us who are skeptical of antitrust law.

The FTC investigated Google for nearly two years and concluded that it had engaged in abusive practices. The result? A letter from Google saying they won’t do it again. No lawsuit. No binding consent decree. This from an administration that is otherwise extremely hostile to business, hyper-regulatory, and extremely aggressive in antitrust actions that don’t involve Google. It’s a disturbing triumph of Washington influence peddling, lobbying, and campaign politics. In a word: cronyism.

Whether we like it or not, the antitrust laws are on the books. The FTC found that Google improperly prevented its customers (advertisers – when you use the Google search engine, you aren’t the customer; you’re the product) from managing and analyzing campaigns across other platforms. The FTC also found that Google improperly scraped content like restaurant reviews from other websites without providing any mechanism for those sites to opt out.

Three FTC members, Republican Tom Rosch and Democrats Julie Brill and Chairman Jon Leibowitz all claim they favored moving forward with either a lawsuit or a binding consent decree. So it’s a mystery that the result instead was simply a letter from Google making voluntary commitments to curb these practices. As the American Consumer Institute quipped: “Letting Google off with a letter promising not to do it again is like believing Lindsey Lohan will stay out of trouble this time.”

Google got off the hook by reportedly spending over $25 million on lobbying, retaining no less than 12 separate lobbying firms. It also no doubt helped that Google personnel helped build and execute the Obama reelection campaign’s vaunted data operation, and Google CEO Eric Schmidt was a high-level adviser to the campaign. Jim Messina, Obama’s campaign manager, said: “For three hours we sat in a conference room, and he just gave me advice about all the mistakes he’d made, about purchasing supply chains, about HR, about the blocking and tackling of growing fast and making sure you have organizational objectives.”

Google also hired Republican consultants like Patrick Ruffini to build support on the right, and found it from conservative heavyweights like the Heritage Foundation and Judge Robert Bork. But Google remains an overwhelmingly left-wing company dedicated to promoting big government in all areas that don’t involve regulating Google.

Google and its allies have for years argued in favor of sweeping government regulation of the physical networks that comprise the Internet called “net neutrality.” They have insisted that a free-market, unregulated Internet will result in Internet service providers blocking web sites, disrupting services, and otherwise wreaking havoc, ignoring the obvious effectiveness of competition to discipline such abuses. They’ve told us that only benevolent government regulators can protect us from these imagined ills. They don’t mention that “net neutrality” would guarantee Google no-cost access to broadband networks that cost billions of dollars to deploy, forcing the full cost to be borne by consumers.

The Federal Communications Commission delivered the Google-favored “net neutrality” regulations in late 2010 but they are likely to be struck down in court. Which could result in the issue shifting to the FTC.

Although many conservatives are cheering the regulatory restraint embodied in the FTC’s voluntary enforcement agreement with Google, I’m not no sure. A government that enforces laws lightly or not at all on its friends while pursuing a stifling regulatory agenda against others (see, for example, the spiking of the AT&T/T-Mobile merger on antitrust grounds) is not something to celebrate. A company that aggressively promotes big government politicians and heavy-handed regulation of others is no friend of the free market. I don’t like antitrust laws, but this non-enforcement looks more like old-fashioned cronyism than a genuine move in a free-market direction.